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Asia's exports have been on a path of gradual improvement since August 2023, but the pace has picked up more significantly in the past three months, according to Morgan Stanley.
In a report, 'Asia Economics | Asia Pacific The Viewpoint: Trade - Improving Fundamentals, Rising Tensions', the global investment banking firm said that the acceleration of Asia's real exports in the past three months has lifted them above the 2021 peak. The recovery has been fairly broad-based across tech and non-tech exports. "This strength in exports is helping the region manage the potential growth downside from central banks having to maintain higher real rates," the report read. The strength in global new orders relative to inventory and a better US growth outlook suggest that the export recovery will continue. If trade tensions re-emerge in a meaningful manner, it would weigh on corporate confidence and capex, and consequently trade, it cautioned. Forward-looking indicators suggest the export recovery will be sustained in the coming months. But at the same time, Morgan Stanley is mindful that rising tensions may yet curtail this improvement. Going backward a little, after rising sharply in 2020-21 on the back of strong global goods demand, Asia's exports peaked in December 2021 before declining thereafter as goods demand began to normalize. "Since reaching a trough in Dec-22, Asia's exports had been modestly recovering since 2H23 but have now taken another leg higher since the turn of the year." This has meant real exports have now risen above the December 2021 peak in January-February. "The recovery in trade is playing out somewhat better than we initially expected. Importantly, the improvement has been relatively broad-based across the region and by product categories," it added. (ANI)
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